Why the Insurance Industry?

Insurance companies are supposed to protect us from catastrophic risks. Yet when it comes to the largest threat to humanity – climate change – insurers are fueling dangerous global warming by perpetuating our dependence on dirty fossil fuels.

You can’t drive a car or buy a house without insurance. Likewise, without insurance, energy companies cannot build or operate destructive fossil fuel projects like the Keystone XL pipeline, oil drilling in the arctic, LNG export facilities and coal-fired power plants.

Insurers prop up fossil fuels in two key ways

Insuring

fossil fuel projects

Insurance coverage allows carbon-intensive coal and tar sands projects to be built and operated.

Once built, fossil fuel infrastructure locks us into dirty and expensive energy that fuels extreme weather and worsens public health.

The 40 largest US insurers hold over $450 billion in coal, oil, gas and electric utility stocks and bonds. They hold a bigger proportion of their investments in fossil fuels than average index funds.

As the ultimate manager of risk, the insurance industry quietly shapes modern society, deciding what type of projects can be built and operated.

Insure Our Future is holding insurers accountable for their continued support of fossil fuels.

More than 4 degrees Celsius of warming this century would make the world ‘uninsurable.’

— Thomas Buberl, Chief Executive Officer of AXA

Insurers know

Insurers know the risks of climate change, yet fuel global warming

Insurers were among the earliest voices warning about the risk of runaway climate change, which makes their support of fossil fuels particularly hypocritical.

Insurers are in the business of risk management. They are experts at modeling catastrophe risk, pricing risk, and designing preventive measures. With an eye to the future, leading insurers were among the first to publicly acknowledge climate change and to call for action in the 1970s. But more than 40 years later, the industry is still one of the major enablers of the fossil fuel industry.

It is a perverse loop that allows insurers to facilitate polluting projects that cause global warming while at the same time providing insurance against the climate impacts of these same projects.

— Bill McKibben, founder of 350.org

Climate change is bad for business

Climate change destroys property covered by insurance

Climate change impacts the value of assets

Insurers who invest premiums in dirty energy companies stand to lose billions as the world transitions to a lower-carbon economy.

This is already happening. From 2011 to 2016, coal companies lost more than 90 percent of their value due to decreased demand for coal. As more clean energy comes online, other dirty energy project will lose their value, leaving insurers invested in stranded assets.

Increased intensity and frequency of extreme weather (such as hurricanes, wildfires and floods) and rising sea levels means more people and businesses are filing insurance claims.

The 2017 Northern California wildfires generated $9 billion in insurance claims, and the 2017 Atlantic hurricane season was the most costly ever, racking up more than $200 billion in damages.

US insurers are falling behind

The US insurance industry is lagging behind

For some U.S. insurance companies, climate change is becoming a core driver of risk management. Many in the insurance industry understand that failure to address climate change is one of the biggest risks to society. The industry uses the latest climate science to calculate premiums and where to offer coverage.

Yet this knowledge doesn’t translate into preventative action. Not one major U.S. insurance company has divested from fossil fuels and none have pledged to stop insuring risky fossil fuel projects. Interestingly, several small and medium-sized U.S. insurance companies have recently reported to the California Department of Insurance that they have divested their assets in coal companies and had no intention of investing in the coal sector in the future. And the online insurance company Lemonade has not only pledged to never invest in fossil fuels, but has also called on the U.S. insurance industry to stop insuring risky fossil fuel projects.

Meanwhile, international insurers are taking action. Some of the world’s largest insurance companies understand the business imperative to reduce carbon pollution. Since 2015, 17 large international insurers have divested about $30 billion from coal companies, and five including Allianz, Axa, Zurich and Swiss Re have stopped or limited insuring the coal industry. Several of these European insurers, including Allianz, AXA and Zurich, offer their services in the United States.

In the investments and underwriting that insurers lavish on fossil fuel companies, they act like climate deniers, ignoring the overwhelming scientific evidence that the emissions they finance are producing a slow-motion cataclysm.